What Is a Conforming Loan?
A Conforming loan is a mortgage loan that follows and conforms to specific Fannie Mae and Freddie Mac guidelines. A Conforming loan is directly tied to the mortgage amount that must fall under a certain loan limit which is determined by the Federal Housing Finance Agency (FHFA).
These limits are subject to change each year, and tend to be higher in high-cost markets. Conforming loans must satisfy the underwriting criteria set by government entities Freddie Mac and Fannie Mae.
Underwriting guidelines for this type of loan include the borrower’s loan to value ratio, or the size of the down payment, their debt to income ratio, credit scores, and documentation requirements. Conforming loans allow as little as a 3% down payment, and are known to have the most competitive interest rates.
New Conforming Loan Limits in 2020
The Federal Housing Finance Agency, or FHFA, has found that home prices have increased by 5.38% between 2018 and 2019 so they have decided to increase the conforming loan limit for 2020 by that same percentage.
In 2019 the loan limit was $484,350 for a single family home in the United States. For 2020, the conforming loan limit will be increased to $510,400. This is the fourth year in a row that the FHFA has announced an increase to the conforming loan limits. Conforming loans can reach up to $765,600 in certain states like California, but can vary by county. This also applies to both FHA and VA financing.
Do You Qualify for a Conforming Loan?
Give us a call at 760-930-0569 and speak with one of our loan officers to find out what the optimal loan program is for you. We will help you navigate the qualifying requirements and set you up with the loan that best suits your needs.